Australian Insurers Take Note of Recent FCA Pricing Reforms

The UK's FCA has implemented a package of remedies to improve competition and protect home and motor insurance customers from loyalty penalties. This includes new rules so that renewal quotes for home and motor insurance consumers are not more expensive than they would be for new customers. This practice is known as price walking, and the FCA considers "It ... distorts the way the market works for everyone. Many firms offer below-cost prices to attract new customers. They also use sophisticated processes to target the best deals at customers who they think will not switch in the future and will therefore pay more."

One would expect this will attract regulator interest in Australia (and NZ), particularly given the most recent raft of "consumer" reforms. It will be interesting to see how this works in practice where risks are priced at the level of the address, individual and the asset. One may need to get under the bonnet of the pricing engine to "see" price walking.

FCA's statement & other materials - worth a read. 

Source: FCA